CITIGROUP (ticker: C) SHARES WERE UP 25% today in late-morning trading amid a big short squeeze in the stock tied in part to an upcoming massive exchange offer for the company's preferred stock that will result in a huge increase in the number of Citi shares outstanding.

Citi shares, which were recently trading at $3.14 a share, now have more than tripled from a low of $1 reached on March 5.

Arbitragers say that Citi shares are virtually impossible to short now because of heavy demand from those who had set up an arbitrage in which they bought Citi preferred and shorted the stock after the banking giant announced the exchange offer on Feb. 27.

Traders say that Citi shares could fall once the exchange offer is complete, which is expected in about a month. That's because of the dilution created by the additional common shares.